Being able to finish a build within budget often feels like a pipe dream.
Costs can easily spiral out of control if a project isn’t managed systematically. Often, cost overruns affect the profitability of your business, but also affects your potential for future success.
In order to remain profitable, it is crucial that your building operation implements Project Cost Management. This is the process of estimating, budgeting and controlling the cost of your build, with the purpose of keeping your expenditures within the forecasted budget.
Successful builds need to deliver on the requirements of the job, using quality materials, reflecting high caliber workmanship, within both the schedule and the budget. Hence, Project Cost Management becomes a key strategy for effective delivery as it helps to create a financial baseline against which you can benchmark your current expenses in order to know what room there is for adjustments should the project need it.
The process of Project Cost Management entails Resource Planning, Cost Estimation and Budgeting and Cost Control.
In the Resource Planning stage, it is important to determine which craftsmen, materials and potential equipment a build may require. This is done before a project is started and implements learnings from previous projects. An important caution in this stage is to factor in time and potential delays due to weather, stock availability or equipment availability.
Bringing in partners or other contractors with specialist expertise that may be required for a project could also be considered, but can affect the cost of the project. In effect, it is important to balance the strengths of your team with the skills required for the build.
Cost Estimation and Budgeting
This is the process of putting a price to the resource requirements from the planning stage. It entails setting the staffing rates, material costs, potential equipment hire if needed, against the realistically estimated timeline of the project.
A key part of the planning phase starts with the designing of the building by an architect or draughtsman. If they are not given a realistic provisional budget, they might design a building that exceeds the costs in size.
People also often design without considering the available budget, and then need to cut costs when it comes to finishings.
It is also important to estimate your costs by looking at similar previous projects and to continuously benchmark with others in the industry. Additionally, you need to assess potential risks or assumptions that could affect your project delivery. This entails ensuring a proper evaluation of the existing site in order to identify possible problems you may encounter in the build. You can also set a threshold for hidden costs that may arise in the project.
Costs can range between R7,000 – R25,000 per m2 but these costs can also increase on a monthly basis.
Although it is arguably the most difficult step in the Project Cost Management process, it is crucial to get the cost estimate as accurate as possible and to work with a sufficient profit margin in order to ensure that hidden costs are accounted for, while still ensuring that you make money when the project is completed.
The key is to get your project budget as close to the actual costs as possible to ensure your success.
The control of your costs entails managing the variances of the actual cost with your projections and taking appropriate actions. This could entail shifting budget between material costs, or reducing the scope of the work while keeping in line with the customer’s expectations.
Cost Control is a continuous process and it is important to constantly keep tabs on every aspect of the build. At the end of each day and week, keep assessing what has been done and how it compares to the projection and adjust accordingly. Keep the threshold you previously set in mind and take appropriate action as early in the process as possible.
Constant awareness of the finer aspects of the build and open communication with staff and partners will be key to ensure that the project stays on track.
Build with BUCO
Opening a BUCO Account can help you to more easily manage your material cost projections and also ensures that you have the facilities to easily control your costs. We also offer clear material cost estimations, delivery and specialist advice at our contractor’s counter.
You can open a BUCO 30 Day Customer Account here.